South Africa pressure to raise VAT rate

A recent tax commission report has recommended that South Africa raises its VAT rate from 14% to 18%.

South Africa’s VAT rate is one of the lowest in Africa where the average is just over 17%. The European Union average VAT rate is over 21%.

The recommendation came from the Davis Tax Commission, which points out that at only 27%, the proportion of indirect tax compared to other taxes is well below other countries’. The alternatives, including a corporation tax rate rise, would damage the country’s attractiveness to inward-investment.

The government has considered a VAT rise several times in recent years to help meet the rising cost of the National Health Insurance regime. But it has backed away for fear of raising shop prices and inflation, and risking future electoral prospects.

Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.